Wednesday, 22 September 2021

Chinese ownership of Newport chip fab dubbed “first order strategic issue”

by Harry Baldock, Total Telecom
Monday 26 July 21

Ciaran Martin, the former chief executive of the National Cyber Security Centre (NCSC), said the purchase of the Welsh chip manufacturer by China’s Nexperia presented a larger security risk to the UK than Huawei

Back in 2017, in an effort to boost the Welsh economy and carve out a piece of emerging tech markets like robotics and 5G, ten councils in the Cardiff Capital Region announced plans to build a £38 million semiconductor factory in Newport. Fast forward four years and, at the beginning of this month, it was announced that the business would be acquired by Nexperia, a Chinese-owned company based in the Netherlands…

Back in 2017, in an effort to boost the Welsh economy and carve out a piece of emerging tech markets like robotics and 5G, ten councils in the Cardiff Capital Region announced plans to build a £38 million semiconductor factory in Newport.

Fast forward four years and, at the beginning of this month, it was announced that the business would be acquired by Nexperia, a Chinese-owned company based in the Netherlands. The new owners have an ambitious growth strategy for the company, seeking to turn its current workforce of 450 into 2,000 over the next five years.

The deal is valued at around £63 million.

“We are very excited to include Newport as part of our global manufacturing footprint,” said Achim Kempe, Nexperia’s COO at the time. “Nexperia has ambitious growth plans and adding Newport supports the growing global demand for semiconductors. The Newport facility has a very skilled operational team and has a crucial role to play to ensure continuity of operations. We look forward to building a future together.”

While this seems like great news for Newport from an investment and growth standpoint, the news of the purchase has not been well received by everyone. 

Former NCSC chief executive Ciaran Martin says that the sale could present an even bigger security threat to the UK’s interests than Huawei’s involvement in the country’s 5G networks – the exclusion of which he himself oversaw in 2020.

“Huawei in the periphery of 5G only really mattered because the Trump administration became obsessed with it for reasons they never convincingly set out,” said Martin, speaking to the Telegraph. “By contrast the future of semiconductor supply is a first order strategic issue. It goes to the heart of how we should be dealing with China.”

Marin is not alone in his geopolitical misgivings, with a number of MPs calling on ministers to intervene in the purchase, saying that the UK’s “sovereignty should not be for sale”. In response, the Prime Minister has designated National Security Adviser Sir Stephen Lovegrove to examine the purchase.

Last week, it was also announced that UK Research and Investment (UKRI) has suspended grants to Newport Wafer Fab under government instructions. 

But Nexperia argue that they are not a security risk. The company began its life as a spin off from Dutch parent company NXP, but was sold to Chinese state-owned investment firm Jianguang and Chinese private-equity firm Wise Road Capital, and is now owned by Wingtech.

"We're not owned by the Chinese state, the Chinese state is not involved in Wingtech," Charles Smit, a board member and general counsel at Nexperia, told the BBC. 

In the midst of a geopolitical and economic crisis, the UK finds itself caught between a rock and a hard place, needing both investment and technological sovereignty. 

 

Can the UK develop a healthy semiconductor industry of its own? Find out from the experts at this year's live Connected Britain

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